01 Apr FAQs About Buying A Business
At A R Business Brokers, we get a lot of questions from our clients about buying a business, the process, the terminology, and much more. We thought we’d shed some light on these questions with answers to some of our most frequently asked questions.
What is Due Diligence?
Due diligence is a comprehensive review of a business to discover, review, and establish the assets and liabilities of the business, and to ensure its viability/potential.
We highly recommend that all our clients conduct due diligence before purchasing a business — no matter how big or small the business may be.
What is a Vendor Take-Back?
A Vendor Take-Back (VTB) is a secondary type of business mortgage, granted to the buyer from the seller, to assist the buyer complete the purchase of the business.
Buying a business is an expensive proposition and not all buyers will receive a large enough mortgage from their primary lender to complete the transaction. A VTB is generally offered at a lower rate of interest than the primary lender, in order to be more attractive to the buyer. A VTB often helps to expedite a sale transaction.
What is a Valuation?
A business valuation is the process of figuring out the fair market value of the business. This process includes reviewing:
- The sale value
- The financial statements
- Any debts or loans
- Partner or ownership details (if appropriate)
- Asset values
- Market values
- Future earning values
- Non-competition clauses (for franchises)
- And more
We advise our clients to work with experts to conduct their business valuations. We have third-party professionals that we can recommend.
Can I get any training or transition plan from the seller?
Every business and every seller is different, and no buying experience is the same. Generally, you will be able to arrange for training and/or transition assistance from the seller, but not always.
Where appropriate, we encourage our buyers to ask for a period of time for training and transition support. Transition timing really depends on the type of business and how much prior experience the buyer has in the industry. There is no fixed timeline or way to approach this request, so we encourage our buyers to ask for what they need to complete a successful transition.
The Bottom Line
At the end of the day, we are here to support you with our expert advice, based on years of successfully buying and selling businesses.
We understand the process, the closing costs, the paperwork, the importance of examining the numbers and what they actually mean, and we are connected with experienced third-party professionals to make buying the business of your dreams a reality.
Contact A R Business Brokers today and we’ll help you with all your questions.